Company mergers can cut costs without cutting prices for consumers, study finds
Merging companies might become cheaper and more efficient to run, but savings are not necessarily passed on to shoppers—and in some cases, customers end up paying more—according to new research.
A new study reveals that mergers between large companies, such as GSK and Pfizer in the pharmaceutical industry, can result in cost savings without necessarily leading to lower prices for consumers. The research, published in the Southern Economic Journal, examined the impact of the 2019 merger on consumer health care products in the Philippines.
The study found that the combined business became more efficient, with Pfizer's supply costs decreasing by 9.43% and its prices dropping by 6.57%. However, GSK's prices increased by 3.25%. Moreover, a major competitor, Sanofi, raised its prices by 8.55%, leading to a higher overall market price for these medicines.
The researchers suggest that while mergers can create genuine efficiencies, they may also result in reduced competition, which in turn can lead to higher prices for consumers. This finding has important implications for competition authorities when deciding whether to approve future mergers between large companies. Lead author Professor Farasat Bokhari from Loughborough University emphasized the need to consider not only the cost-saving potential of mergers but also their potential impact on market competition.
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